Global Investing

from MacroScope:

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Inflation is plunging faster than analysts are forecasting just about everywhere in the developed world. Except for Britain. Those accustomed to high prices and inflation-busting increases in tube and rail fares at the start of every year were probably not surprised.

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A day after Britain unveiled a multi-billion-pound fiscal stimulus package to spend its way out of recession, market analysts have been busy figuring out what it all means, in the context of a sharply slowing economy.

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Barclays needs to answer that question after selling big stakes to Middle East investors rather than tap taxpayer funds. The bank is effectively paying 13 percent annual interest for at least a decade, whereas it could have paid the UK Treasury 12 percent for a few years. Add in a whopping 300 million pounds in fees and the deal could cost shareholders as much as 3.2 billion pounds extra, Merrill Lynch reckons.

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Britain’s banks may have borrowed over 200 billion pounds from the Bank of England, four times the amount they were expected to take under an emergency liquidity scheme. It leaves them facing a sharp funding strain next month when the rug gets pulled away.